Private Generation FAQs

We know many customers are looking for additional information about the proposed changes to rates for future net metering customers. These proposals are still being reviewed by the Montana Public Service Commission. Nothing is final and things can change from what we’ve proposed. However, we want to keep you updated. Please check back frequently as we add to the list of frequently asked questions.

NEM was introduced in Montana in 1999. It is a program that provides a special meter to customers who install private generation. Most often this private generation is in the form of roof-top solar but it can be other sources such as wind or small-scale hydro. Net metering allows any surplus energy generated but not used by the customer to be exported to the electric grid. This unused energy is tracked and made available as a credit to the customer on future bills until their selected 12-month billing period ends. At the end of the 12-month billing period Montana law mandates that the energy credit resets to zero.

What is changing with net metering?

NorthWestern Energy has asked the Montana Public Service Commission to review its electric rates and to consider changes in several areas, including the future rate structure for residential customers. A key element of our proposal involves instituting pricing for private generators, also referred to as customers with net meters, that better reflects the cost of being connected to the electric grid.

When NEM was introduced, customers on NEM were kept in the same customer and rate class as residential customers who do not have private generation or a NEM meter. Residential rates are designed to recover the costs associated with supplying electricity and maintaining the energy grid for customers. When a customer installs private generation, such as solar panels, it changes the amount of energy they use and the way they use the energy grid. Sometimes NEM customers are generating enough electricity to power their home, sometimes they are generating a portion of their need, sometimes they are putting electricity back on to the energy grid and sometimes they are generating no electricity and are getting all of their electricity from the grid. Since we cannot predict when the sun will shine or how much electricity any one customer will use on a given day or at given time, we have to maintain enough access to electricity and infrastructure to meet all customers’ needs 24 by 7.

The costs associated with maintaining the energy grid are mostly fixed in nature – this means they do not change much based on how much or how little actual energy is being used. Rates today are designed such that customers pay for using the energy grid based on how much energy they use. Since most NEM customers are generating a portion of their own electricity needs, they often take less electricity from the grid than they otherwise would have if they did not have private generation. And, sometimes NEM customers use the grid to transport electricity back on to the grid when they are generating more energy than they are using.

Today, NorthWestern Energy’s Montana customers who net meter pay about 65 percent of the cost of service and being on the energy grid. Under the current rate structure, these fixed grid costs are shifted, over time, to other customers.. As more and more customers elect to install private generation, the size of this cost shift will grow if the rates are not re-aligned and designed in a manner that collects costs from all customers fairly.

What is the penalty for customers who disconnect from the grid?

There is no fee to disconnect a home or business from the energy grid. There are self-generating energy consumers located throughout Montana who are not connected to any energy service provider.

When a net metering customer generates more energy than they use, what happens to that energy?

When a net metering customer generates more energy than they use, that energy is transferred to the grid. The customer receives a kWh credit to use on future bills until their 12-month billing period ends. At the end of the 12-month billing period the energy credit resets to zero. The current bill credit amount is the full retail rate of 11.1 cents per kWh.

How much energy goes back to the grid that isn’t used as a credit for net metering customers?

In 2017, about 235,000 kWhs, or 235 MWHs, were transferred to the grid, but not credited to net metering customers’ bills because their energy credits reset to zero when their 12-month billing period ended.

In 2017 NorthWestern Energy’s Montana residential customers used about 2.54 million MWHs of electricity. While the amount of net metered energy transferred back to the grid that customers do not receive credit for is small given the overall context, determining how that transferred energy should be used and paid for going forward needs to be addressed.

Does NorthWestern Energy make a profit on this excess energy?

The perception that NorthWestern Energy is making a profit on the transferred energy today simply isn’t true. Any excess energy transferred to the grid is tracked and credited back to the customer on future bills. The credit is at the full retail rate of 11.1 cents per kWh. The retail rate includes the costs associated with maintaining the energy grid and back-up generation, and paying taxes and other related expenses. Today, NorthWestern Energy is recovering only about 65 percent of the costs it incurs to serve those who net meter.

Why can’t that energy go to serve someone else?

While that energy can be used to serve other NorthWestern customers, Montana law requires any excess credits to be granted to the public utility at the end of the 12-month billing cycle. As several witnesses in the current NorthWestern Energy Montana Public Service Commission rate review hearing, including those from Vote Solar, have said, the goal is for residential customers with private roof top solar to install systems that generate the amount of energy they use themselves, and not to install systems in excess of what they need for their own use.

The issue with electricity is that it is still relatively expensive to store and would require significant investments in batteries to do so. While a net metering customer may generate more electricity than they need at a given point in time, this energy flows on to the grid and is not available at a future point in time when it may be needed.

How were the rates in the rate review for the new class of net-metering customers determined?

The 2017 Montana Legislature, through House Bill 219, required NorthWestern Energy to conduct a Net Metering study of the costs and benefits of customer-generators. NorthWestern Energy retained Navigant to conduct an economic analysis and evaluation of solar net energy metering benefits and costs.

The net metering rate in the rate review was proposed after consultation with The Brattle Group, an economics consulting group with a utility and energy practice, as well as experts in allocated cost of service.

As part of the rate review, NorthWestern Energy is asking to add a demand charge for net-metered customers. What is a demand charge?

The proposed demand charge would be paid each month by new net-metering residential customers. It would be based on the single hour in a month when a customer used the most energy. NorthWestern Energy’s proposed charge would be $8.64/kilowatt.

Electric demand meters function like your car’s speedometer — with an important difference. A demand meter’s needle advances as electricity consumption increases, just as your speedometer needle advances as your speed increases in a car. When you stop the car, the needle moves back to zero. Unlike a speedometer needle, demand meters record the highest average kilowatts reached in a 1-hour interval within the billing period.

If your demand reaches 3 kW, for example, the meter needle will stay there, unless your demand exceeds that level. If your demand later reaches 6 kW, the meter needle would then stay at 6 kW. Each month the demand meter would reset to zero.

What affects demand?

In a home, demand is created by how much electricity is being used at a single point of time, measured in a 1-hour period. So, if the dishwasher, clothes washer, TV, refrigerator motor, hair dryer, microwave, and oven are all running at the same time, the metered demand is higher than it would be at a time when only the refrigerator motor is running.

What are other Montana energy companies’ rates for net metering customers?

Technology advances make equipment such as roof top solar panels more affordable and reliable today. This energy sector is advancing, and it’s time for the rates for this sector to be updated so they are a fair reflection of the cost of service for this sector.

It’s a challenge facing utility companies and rural electric cooperatives across the country and has been studied for years.

While one Montana cooperative has a different rate for net metering customers, several now have demand charges to address cost shifting between customers who use the grid system differently.

In Montana, regulated utilities are required to allow self-generating systems of up to 50 kW to net meter. Other than Flathead Electric Cooperative, which also has a 50 kW maximum, cooperatives have a lower maximum, from 10 kW to 25 kW.

Rural electric cooperatives in Montana have basic monthly charges for their residential customer class, which can cover more of the fixed costs. Those basic monthly charges range from $19 per month for Yellowstone Valley Coop to $52.78 per month for Lincoln Electric Coop.

If the new class of customer is approved and a net meter was requested, but not installed yet, is that customer “grandfathered?”

If the Montana Public Service Commission approves a new customer class for net metering customers, the Commission will set a timeline for when the new rates will go into effect; however, Montana law provides that customers are grandfathered if they have interconnected with NorthWestern Energy’s system by the date the Commission issues a final order in the docket. NorthWestern Energy will mail current net metering customers, as well as those who have requested a net meter, updated information as soon as we have direction from the Commission.

I am a net metering customer. How will I know when a decision has been made?

NorthWestern Energy will mail you information that will provide an update on the current status of the rate review process as soon as we have an update from the Commission.

The Montana Public Service Commission decision about the NorthWestern Energy rate review application, which includes the proposed new customer class for new net-metering customers, is still to be determined.

What is private generation?

We consider private generation – also referred to as net metering – to be any electric generation rated 50,000 watts (50kW) or less that interconnects to NorthWestern Energy’s electric grid. Private generation power can be made with renewable sources such as a solar photovoltaic (PV) unit, small wind turbine and/or micro-hydro system.

Are private generation customers still connected to the electric grid?

Yes. Our customers who have their own generation rely on the electric grid when they can’t produce enough electricity to meet their needs and when they put any excess power they produce onto the electric grid.

Will existing residential net metering customers be affected?

No. This change will not be automatically applied to existing, self-generating residential customers or those who connect to our electric system before a final order is issued in this rate review. As a grandfathered net metering customer you would have a one-time option to switch to the new private-generation class or remain in the bill class where you reside today.

If I sell my property, will the new owner still be grandfathered?

Yes. If a net-metering system is grandfathered and the customer sells his/her property, the new owner of the property will also be grandfathered as long as the interconnection agreement remains in place and the new owner does not increase the size of the system.

If I add additional generating capacity will I still be grandfathered?

This is being reviewed as part of the rate review.

Is NorthWestern Energy opposed to private generation?

NorthWestern Energy supports renewable energy, including private generation or net metering. However, these rate changes are important to balance the needs of all customers and for the system to be fair to all.